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tv   Book Discussion on The Gray Rhino  CSPAN  May 1, 2016 3:00pm-4:16pm EDT

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>> host: and that will bring our three hours to a close. wil haygood can be contacted at miami university in oxford, ohio. thanks for your time on booktv. >> guest: thank you very much. been an honor to be here. >> c-span, created by america's cable television companies and brought to you as a public
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service by your cable or satellite provider. [inaudible conversations] >> i'm carla freeman, i'm delighted to welcome you to this evening's foreign policy institute conversation with author michele wucker. she has just produced her latest, excellent book, "the gray rhino: how to recognize and act on the obvious dangers we ignore."
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it's wonderful to welcome michele to sais, i am so grateful to her for putting us as a stop on her book tour. i heard about this book last fall and so have been anticipating it x it's an exciting read -- and it's an exciting read. i think she has sort of been asking the question why we ignore crises that we can see coming until they literally stampede us. i think she's got a new paradigm for speaking about risk, and i'm excited to hear her discuss some of her ideas this evening. this book follows two others that i read the one on haitians and dominicans that i -- and i had not put that together. i didn't realize when i met you last fall that you were the author of that exquisitely-written book. she also wrote a marvelous book on immigration that asks why we get immigration so wrong even though our prosperity depends on getting it right.
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she's a prolific writers has had a distinguished career in journalism and has also received numerous awards for her leadership including young global leaders award through the world economic forum x she has also been recognized as a guggenheim fellow and has been the president of the world policy institute among other leadership roles. welcome, michele. and leading our conversation this evening is dr. jeff leonard. dr. leonard is the ceo of the global environment fund which is a private equity fund that invests in growth companies that focus on renewable energy and environmental cleanup as well as energy efficiency. he is chairman of a number of boards including the board of the washington monthly. he also serves on the board of new america. and he himself is a prolific writer.
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he's produced five books including the award-winning "pollution and the struggle for the world product." so we're very grateful to have him lead the conversation this evening, and i hope that all of you will stay and continue it at at a the end of their discussion and the q&a. we're going to have a raffle and raffle off some books that michele's publisher was kind enough to make available to us. she will sign books, and i hope you'll enjoy the reception and discuss the ideas that we are going to talk about this evening. so welcome. >> thank you very much, everyone, for coming. it's great for me as a washington person to be here at sais. also i should say it, we've hired a number of sais people because the worldliness of a sais student is what we really
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need at gef. we have to have the big policy pictures and so on, but also the ability to do it with really serious financial skills. michele, i'm very fortunate because i've been able to, as sort of an idle friend of michele's, we get together periodically, we mail often about ideas, so i've been able to be present since the early gestation of this book, and it's very, very exciting. it's an extraordinarily well-written book, and i don't usually say that about policy books or books like this. but it's very well written. it has, it unfolds in so many profound layers. and we'll only scratch the surface of the gray rhino syndrome today in our conversation. but it, you really could apply -- we're going to try to keep it to foreign policy. but the book itself, some of the richest parts of the book are on corporate behavior and on domestic policy and even down to
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individual behavior in political settings and so on. so we'll -- i think it's really going to be fun today because we'll elicit from you, we hope, ideas about how to apply in this foreign policy. the concept i'm going to let michele twine for you and tell us -- define for you and tell us how she found her way to it. i just want to say that about 30-something years ago as a graduate student at the london school of economics, i was traveling in what was then yugoslavia. and i kept a journal. and as -- i was studying political economic systems, and i really wanted to understand socialist economics and what was going on with reform in the socialist systems. so i traveled all over yugoslavia. i kept a journal. i wrote prolifically about it. i wrote some articles and so on, but one thing stands out in that journal, i still have it today. it said: everybody i talk to hates everyone else.
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and i said this country -- [laughter] is going to blow sky high when tito dies. so that's kind of the gray rhino. anybody who was present there could see, could feel that this was a country only held together by the force of one man. but 1980, of course, he died, and then we've had bosnia, we had all these horrors and terrible situations. but that gray rhino was so apparent, and yet nobody be talked about it. so to me, that is the epitome of what michele's going to talk about today. so i'd like to start maybe with you telling us, defining the gray rhino, and then after you do that tell us how you found it. >> sure. and i have to say praise from jeff is really something else, because he's quite an accomplished writer himself. so thank you for that. so the gray rhino is something that's really big. it's coming at you, it's got a big horn, it's really dangerous.
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it's as if you think of the elephant in the room, the big, obvious thing that nobody wants to talk about and that we take for granted that nobody's going to do anything about, but it just kind of standing still. and you get the elephant in the room together with the black swan, a book that came out about ten years ago, saying we need to pay attention to unpredictable, high-impact events that as an individual it's hard to predict, but as a group happen much more than we think. so you get the elephant in the room together with the black swan, and the love child is the gray rhino. it's something that's highly probable, it's predictable -- within reason, of course. you might not know every single contour of the detail, but it's going to happen. it's a matter of when, not if unlesssomebody does something big and dramatic to deal with it. but it's not getting attention that it needs. this might not mean that it's
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completely ignored, but it's something that's certainly not being dealt with properly and certainly not resolved. and the way i came to the rhino was looking at sovereign debt crises. in a former life, i was a financial journalist writing about emerging market debt and was fascinated by argentina. and as many of you remember in 2001, it had a pretty dramatic falling apart. about nine months before that, there was a proposal that went around wall street, some very, very smart bankers and academics saw the direction things were going. there was no way argentina was going to be able to pay its debt if it kept going the same direction, so they said, look, here's a proposal, let's write down 30% of this debt, and that's what it will take to turn the situation around. argentina wanted to save face, so they said no. and the banks were doing all kinds of crazy restructuring
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that were very expensive and not solving the problem, so it didn't happen. of course, nine months later argentina collapsed, and the banks lost 70% of face value instead of 30% which that idea of 30% versus 70% was a pretty clear example of a stitch in time saves nine, to me. you fast forward ten years to 2011, and greece is having the same dynamic happening. and in this case it threatens the entire european union. and i wrote a paper about that for the new america foundation saying, basically, greece, you can learn from argentina's example, and if you don't, the consequences are going to be bad. and it went right down to the last minute. i think they were already halfway off the cliff, and people got together and pulled them back off the edge. private creditors and greece came to an agreement that it was not perfect and not everything was solved, but it certainly helped keep greece from defaulting and, in turn, helped the european union from falling
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apart. and so i started asking myself what's the difference? what's the difference between greece and argentina? what's the difference between people who see this big, scary thing coming at them and do something and the ones who don't? >> you say that it's really not about weak signals. so in both of those cases, the signals were there. it's about weak perception or weak action to the signals. and i presume that's kind of how, one way you would distinguish a gray rhino from a black swan. but there's one breathless paragraph early in your book after you've defined it where where you sort of say many of the biggest, intractable challenges we face in this world today are gray rhinos. and it is breathless. it's impending climate change, anemic economic growth rates, rapid and profound changes in labor market dynamics, widening income disparities, youth unemployment, you know, on and on and on.
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so we know, of course, that as karl popper said, a theory that explains everything can't explain anything. so i want you to help -- because since this is early in the book, the whole rest of the book describes why. it doesn't explain everything. but take us through the broad sort of stages of recognizing and dealing with a gray rhino about crisis. and do also help me, because there's one great point where you say behind every black swan is a crash of gray rhinos. now, luckily, i'd read the part of the book that said a rhino group is actually called a crash. >> how great is that? [laughter] >> but -- yeah, exactly. >> i couldn't have made it up, you know? >> why is a crash of gray rhinos behind every black swan, and tell us how you recognize the black swan, distinguish it and cope wit. >> sure. -- with it. sure. well, when you see a lot of obvious things coming together, they often -- when they meet,
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you might not be able to predict how they meet or exactly what the consequences are, but it's a combination of predictable things coming together. the 2008 financial crisis is just a classic example of that. you had the subprime crisis, you had questionable uses of derivatives, you had loose supervision of banks, you had a lot of reckless behavior. you also had a lot of warnings. you know, a few months before everything went down, christine lagarde came out and said, look, we're facing a financial tsunami. if you do a nexus search of news stories at the time and references to, you know, crisis, subprime mortgages, credit default swaps, it's pretty clear that, yes, we saw it coming despite what so many people have said in hindsight. and the black swan had just come out at the time, and everyone was talking about, you know, black swan, financial crisis and, oh, this is a black swan. nobody saw it coming. even though people did.
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and i felt that they misused the black swan concept a little bit. because, first of all, it's improbable and unpredictable. so the minute you can actually see it coming and imagine that it's happening, it's definitely not a black swan anymore. but then on the flip side using almost perfectly opposite logic, you have people after something happened who would say, oh, well, that was a black swan. perfectly unpredictable, unforeseeable. and 2008 really was a crash of gray rhinos. i think certainly even people who saw lots of element ares of that happening -- elements of that happening probably didn't quite have the sense of exactly how extensive the damage was going to be. but a lot of people knew it wasn't going to be good. i was living in new york city at the time. i had an apartment that i'd bought a few years earlier, and it had almost doubled in value. this is a very small example, but i sold my apartment, and i think there's some other people who made much bigger bets on the
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fact that things were not going to keep going the direction that they were. >> so the way you describe it though, it's almost as if people at the beginning stages you talk about denial, and then there's a muddling phase especially, and sometimes that's benign. people just don't want to admit it. and sometimes it's more negative, you have a lot of examples of how institutions systematically fail or don't allow people to call these things to attention. and i just wanted to give you one example that's so striking about 2008. i was the chairman of the board of emerging markets private equity association at the time, and my board was filled with some of the smartest investor people, you know, on the planet. and we had an off-the-record dinner one night here in washington, d.c. with the chief economist of standard & poor's in 2007. and some of the people on our board were just, behind closed doors they were going what in the hell is in this junk you're rating? and they just pilaried him the whole night.
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the guy basically said, honestly, we don't know. we're just as worried as you are. there were all these comments. these institutions were aware, they were just praying it would go away. like that gray rhino, we're praying it's going to turn other way and not come our way. but sooner or later, you have to reach the stage where you respond and deal with it. help us out on that. how did it unfold that we tried to deal with it or we did? >> you know, i think that the s&p example is a very good one. there are a lot of people who didn't know what was going on. there were certainly a lot of journalists who wrote about things. but this denial is very interesting. it's a first stage. and when i started thinking about this denial, of course, the first thing i did was go and buy a copy of elizabeth cubeler ross' book on death and dying. everybody knows about the five stages of grief. and she had said that it's, it should be a temporary phase. it's self-protective. it gives you enough of a cushion that you can start absorbing
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what's happening, because if you absorb it all at once, it's just too much, and a lot of people will freak out and break down. and that was interesting to me. and i think some of, some of the psychological mechanisms that humans have for dealing with problems are that denial. but we also set up decision making systems, and there are also some unconscious things that we do. i pent a lot of time -- spent a lot of time looking at denial and some of the cognitive biases we have to get in the way. one of the biggest one withs have to do with decision making structures we set up, group think. which is that when you get a lot of people who are similar, have similar perspectives, come from the same places, whatever measure of similarity you want to use, when one perp around the table says something, it's much more likely that you see all the heads nod all the way around the table. and it becomes very difficult to say something that is not what
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people want to hear. and i think that's certainly something that happens in markets. we're very, very tempted to think that the party's just going to keep going on, and nobody's going to take the punch bowl away. but it's inevitable. i look back at that, charles kindleberger and his work on financial crises and some of the people who made this proposal on argentina in 2001 were very much fans of his. i feel like anyone who had ever read charles kindleberger had to have recognized that. and, of course, re-released his classic book recently. the first stage is denial. there are other reasons. i think there are a lot of people who take advantage of this human tendency towards denial things we don't want to hear. actually, you've got the monkeys, the see no evil, hear no evil, speak no evil monkeys, you get toes trip with the head in the sand. it's this wonderful menagerie hanging out with the gray rhinoses and the black swans and
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the elephant in the room. but once you go, once you realize that people are so susceptible to it, you can manipulate that. you look at the tobacco companies, you look at some of the testimony that's been coming out about the oil companies that knew inside very well what the risks were and what were going to happen and really concealed that. and so there's a certain sort of manufactured denial that we can, we can either take advantage of, or we can be aware of and question much more actively why are we denying this. >> and wishful thinking. >> and wishful thinking. >> if it just went away, it'd be a heck of a lot better than for me to have to fess up. >> very much. and i think our culture is like that. >> yeah. >> you know, you look at income inequality, say, and you look at the people who look up to certain candidates, you know, millionaires, billionaires, you know, very wealthy business people, you look at the debates
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over taxes, you look at the debates over trying to, trying to address this problem of income inequality which is affecting growth which is helping to create the poisonous political climate that we have, and a lotof people don't want to make some of the hard decisions. even people who would benefit from them. because i think i could someday, you know, have a big, shiny building with my name on it. >> you cite the rule of one of my old professors, rudy dornbush, when you say the crisis takes much longer in coming than you think and happens much faster than you think. and this is a challenge in markets, in the financial markets. i could never be a hedge fund manager because there are so many times when i'm right, but it takes three years to be right. i remember in the 1990s we went to our investors in private equity and said we think the u.s. stock market is completely and totally overvalued, you know? and blah, blah, blah, blah, blah. and, you know, two years later, three years later they were still saying to me, you know,
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the public markets are outperforming you by 280 basis points, you know, every year. and we were sure they were overvalued, but it was way too early. so how do you deal with that? when you arrive, you see this crisis so early, but others don't or they're not ready to act or their institutions aren't ready to hear you, you know? like we've heard so many stories from 2008. >> yeah. it's very common. and in many cases it's a matter of when. but exactly when, that's a little, you know, devil on your shoulder. that's where i think you need to come to the understanding some of the later phases of a gray rhino, you know? start with denial, and, you know, i was just really so inspired by the book, i thought, hmm, maybe i could have five stages too. [laughter] it actually worked out well that way. so the second stage is muddling. it's when everyone is saying, okay, yeah, this is a problem, but they come up with all sorts of reasons not to do anything
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about it. and the stage after that i call diagnosing, but you could also think of it as, you know, blaming or bargaining. it's the what do you do. it's making sure you have the right solution. the fourth stage is panic. it's the time when the rhino is just about on top of you, and it's a double-edged sword. on the one hand, you are much more likely to make missteps. you're going to make bad decisions. we see that often in financial crises and economic crises where when the economy's booming, nobody wants to cut the budget, nobody wants to be responsible. and it's just on the way down that they all want to cut the budget, and that actually creates the snow pal effect -- snowball effect, and things get worse and worse. and the final stage, of course, is action. it's when you do something. and usually action happens in such a way that a small group of people start acting. and you want to create a ripple
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effect. how do you get these leaders, these influencers, how do you convince other people that it's in their interest to actually do something to make the hard decision? >> boy, that's a great transition to what you and i both said was the biggest inconvenience, inconvenient truth of all or the biggest elephant in the room which is climate change. the reason i say that is because we are actually 20 years or more into the diagnosis. and i remember taking a course at harvard in the 1970s with professor roger ravel, and he was talking about climate change and the greenhouse gas effect. here we are, actually this year, we had this monumental set of agreements. how do you see where we are with climate change and where we go in coming years in sort of the scheme of your framework? >> sure. well, climate change is a great example of all different, all five stages at once. the number of people in denial
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is, it's shrinking, happily, after many years of very hard work by many people. you hear muddling, you hear diagnosing, what do you do, what don't we do? some of the diagnosing questions become kind of wild, you know? we're going to seed the clouds, we're going to -- technology's going to magically solve everything. i think some technologies very much can. there's one in the booking that just blew me away in conversation that i had moderated in china a couple years ago at the summer davos with a company that had created to literally create plastic out of thick air. >> i had to google that one when i was reading about it. [laughter] >> it's a carbon capture technology where they put something, i don't know, on top of the smoke statistics is how i imagine it -- smokestacks is how i imagine it, although i'm sure that's not exactly how it happens.
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they shoot enzymes at it, and it's turned into plastic. it's being used in a lot of smartphones. so it actually takes the carbon out and turns it into something good and actually saves whatever carbon might be produced otherwise in creating the thing that's good. you look at some of the renewable technologies, there are lot of very, very interesting things going on. you know, when i was in the emirates last october, you know, they were doing some very interesting things with clean energy. and you see a lot of it across the middle east now. they're looking at clean energy technologies. i just saw a story a couple weeks about ago about morocco and solar power. so there are some things that can be done, but at the same time you still have huge subsidies of the fossil fuel industries. you're just now seeing the extent of the efforts that they've made to perpetuate denial, and we're not, you're not seeing enough of a sense of the risks that climate change is
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posing to those companies. although i think that some of the changes we've seen in oil prices over the last year are in some part due to the changing technologies. there's lots of supply and other factors in that as well. but, so you are seeing action. i think some of the dramatic numbers and facts that have come out over the last couple years that the crazy receding of arctic ice, you look at some of those maps, and it reminds me of a painting. ah! you know, this is the scream. the highest temperatures on record. you see some of these increasingly violent storms, and every time they happen you get the predictions of the rising sea levels. it's getting harder and harder and harder to ignore. and the more people are affected personally by it, the more impetus you get for change. that said, you know, i think it
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was amazing that we finally got the paris accord on climate change. but i don't know anybody who thinks that it was enough. and i don't know anybody who thinks that it's going to be implemented fully. and so that's a real cautionary tale in most cases of action. you see day late, dollar short that it's never quite as far as it ought to be. >> right. and it seems to me -- at least in my lifetime -- we've always been trying to fight a rear guard action. especially when you think about environmental problems and related things like tragedy of the commons type issues. but you, and you cite a number of examples in the book about companies that have taken a leapfrog approach to starting out fighting a rear guard action say for an environmental type problem but realizing that by addressing it full on, they leapfrog to new technologies that make their business more efficient or change their business model or allow them to morph completely and avoid a gray rhino of going into obsolescence.
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so i thought about that, and in the corporate sectors you sort of say what it takes for that is a group of ceos maybe, ceo to ceo to start talking about these things and start to share, you know, their leadership, and they're almost competing with each other. i was struck by the fact you talk a little bit about the emergence this last year or two of china and the u.s. seeming to say, set a long-term agenda for leadership in climate change. is that potentially an douse to what you have seen in the corporate sectors where with corporations, you know, pepsi and coke have tried to outdo each other on the sustainability issue and so on? >> absolutely. you really have to see countries working together. i have a friend -- a friend i have all sorts of arguments with. a friend who's fun to argue with. who might be here tonight. i remember having an argument with him once about suvs. i'm not going to stop driving my suv because no matter what i do, china's building a new coal
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plant every day, and there's no point. you know, this helplessness, worrying about what the other guy's going to do is a real issue. so you get countries worried about competitiveness, they're worried about people feeling they're going to fall behind, and one of the solutions to that, i think, is this idea of transparency. and, actually, one of the things that came out of paris was this discussion of, okay, who's going to hold countries accountable for how closely they meet these targets? when you count something, it's much, much easier to do manager about it. [laughter] it really helps. but as it becomes harder and harder to hide risks, as it becomes harder to, you know, to get away with doing things that we've got social media, we've got this digital outreach, we've got people becoming more and more vocal on these sort of things, it becomes much harder to avoid.
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and so that shining light of transparency on what's happening is incredibly important. and, you know, china certainly had pressure from outside as the united states, but there's also been a lot of pressure from inside. i mean, some of the videos that were going around and the protests about pollution in china were, they were heard. you could tell they were being heard. >> so that's another gray rhino from my perspective, because i've invested in china, and we invested in companies that were in the food chain trying to keep it from being poisoned, dealing with air pollution and water pollution, but one of the things we saw and our team saw out in the secondary cities of china starting at least five or seven years ago was that there were huge demonstrations and disruptions, civil disobedience, in effect, relating around environmental concerns way before there were, you know, even for the tibetans or other things like that in china. >> very much so. one of the interviews in the book is of peggy liu who helps
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to promote u.s./chinese cooperation on clean energy. and she's got all of these very elaborate face masks for the pollution. in fact, her facebook profile has a picture of her with the mask. she wears the mask, you know, beautifully embroidered. and she's very, very passionate about this and says, look, you know, if you can't, if you can't have air that people can breathe, that eventually is going to be a big problem. she's had to evacuate her kids sometimes. and she showed me, you know, i downloaded the air quality index app when i was in china and was amazed. i think just being able to count the air quality index every day and say something about it is important. >> so let me take you through a couple of big picture foreign policy concepts, and let's talk about how we can apply gray rhino thinking to it, and maybe that'll also be when we open up for questions, stimulate some of the issues we might talk about
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with you. first of all, one interesting thing, michele, you went to a camp where i took my two boys many years ago as well in south africa, and i have a picture of our jeep literally right behind a rhino walking down the road, and the rhino is marking its territory and, boy, does that stink. the musk that they let out. so it seems to me that in some respects sometimes you have to have some pretty stinky things associated with the gray rhino situation. so let me ask you about that. we all remember the concept of ghost wars, and, you know, effectively by doing a deal with the devil, with the afghani mujahideen, we created osama bin laden, and we created the circumstances. and i think policymakers sometimes call that blowback, you know? in covert areas, that's the blowback of our secret cia operation. but how do we look at that? and there are many examples of
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that. of course, we had to do a pact with hitler -- with stalin to defeat hitler. we had, you know, many, many issues like that in our foreign policy. how can we look at that? it's almost like dealing with one rhino crisis, sometimes you have a baby rhino that many years later, in the next generation, comes back to haunt you. >> very much so. and then sometimes, and i see situations like this right now, where you've got clashing rhinos. and you've also got situations where people will define them very differently. syria, you look at that absolute quagmire which is one of the types of rhinos i call a gordian knot in terms of how hard it is to unpack. i think you have, you know, russia and the united states defining the nature of the threat and the problem and the solution in extremely different ways. so that, i think, tells you how important it is to try to find
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ways to align the key stakeholders in something which is much, much easier said than done. i'm not pretending that it's easy, but, you know, there are certainly camps that say assad is the problem, you know? assad is the only one who can bring order to the sort of diametrically opposed ideas. or you look at the debates over interest rates and quantitative easing right now. you with have the, you know, that quantitative easing has led to a number of speculative bubbles in the markets that have a lot of people thinking are we going through 2008 again? but then on the other side you have economic growth which is still, you know, that the imf numbers that have just come out are not very cheery. so you've got two completely, you know, seemingly butting horns, butting heads, i'm not sure -- [laughter] sorry. i don't want to get too heavy with the metaphors there.
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but deciding what is the biggest problem. and there are times when you're going to have to trade one problem for the other. you know, there are sometimes you're going to have to say, okay, this one, i'm going to let it go. >> so let me, that -- your book came to me, i had preordered it from amazon, and that one just came two days ago. but the one from the plusher came -- publisher came about two weeks ago, and it was right at the time i went to see the new movie, eye in the sky, which is about drones and the moral dilemmas of drone usage. stunning movie, for me anyway. it just really hit home. but it made me think a little bit as i was reading your book, you know, your concept of gray rhino is such a rational, it's almost like rational self-interest. companies can, you know, can use it to see their rational self-interests and so on, but what about making moral judgments as in eye in the sky where the judgment is, okay, one collateral damage is perfectly fine by united states policies and everything, but when you get to know this girl in the movie
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and you're sitting there in the movie realizing she's the one collateral damage, you know, this drone strike? you are just at the horns of a dilemma. and how can you, how can we apply gray rhino thinking to moral issues, in other words, like that? >> it's very tough. at one point in the book i talk about the trolley problem. you know, the dilemma between, you know, a trolley or train is coming down the track, and it's going to run over six people. question is do you flip a switch so that it runs over one person instead of six people. and it's that active behavior that people have so much trouble with. >> like in the movie where there were going to be 80 faceless people by the bombers, but one girl you'd gotten to know in the movie who would be killed if they did this strike. and i just was -- >> and that speaks so much to
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the importance of emotion in policy making, in other decision making. i mean, i'm perfectly happy to wonk out with as many, you know, numbers and analysis, you know? i like the rational approach to things, but i know rationally that that's irrational, because that's not how people react to things, you know? you think about, you know, the tragic photo of the little boy on the beach. you look at the tremendous reaction to that, and it was, it was really heart-rending to see that. or you look at the reactions that people have to the people who were killed in the terrorist attacks in paris and in brussels and the tremendous reaction there and not as much to deaths of people -- same number of people in places that westerners didn't have as many connections with or where there were much
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more regular attacks that, you know, the more attacks there are, the more they lose their motional resonance. emotional resonance. and i think it speaks to a real balance in policy making, you know? are these lives worth more than those lives? it's not an easy decision at all. you've got con stuff wents to answer -- constituents to answer to. and, basically, there are going to be trade-offs. and they are going to be harder to make when there are emotional decisions to be made. >> i just thought of something. you started out talking about argentina and greece and what's the difference. is there a possibility that it's just a little bit of nationalism or racism involved here? because greece was at least a country in our union that we knew, and argentina was, you know, it was we, the western bankers, against them in a way.
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is there some of that? >> i think it has to do more with the interconnections that, you know, that greece was so tied many with the whole european ideal and that argentina was, you know, way, way down in south america somewhere. >> perfect set up. because what i wanted to actually get to is you do talk about that. you talk about engagement. the guy's saying how does greece solve it, engagement. and i thought about the people, my ceo at new america, anne-marie slaughter, joe new york and others who have talked about soft power in foreign policy. and in a sense, that's kind of what -- that's analogous to solving gray rhino problems. a secret to it is that jurists from all around the world get together and talk about cases, and legislators talk about things and, you know, that ties us, the united states, more and more into a system. we've facilitated china and other countries getting into world trade organization and so
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on, and that locks them into -- now china's a reserve currency, so they're locked more into the world. is that problem solving, gallism? >> i think fors important. this some cases the way change happens. as romantic the ideal of a big revolution is. i think it's in many cases it's ten by step. but the engagement and the ties, you create very different trade-off, you create very different emotional associations. and, you know, it's funny. the title gray, i didn't come up with it intending, you know, nuance. it was, but i think that's a very, very good additional sort of like, you know, the icing on the cake. it's a way that the metaphor works. actually the gray came from the black rhinos and white rhinos. and when i finally came up with the rhino image for the book, i
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was talking to a friend, and i said it's coming at you, it's a rhino. and this was someone from the financial world who made a black swan joke, and he said, oh, it's a black rhino. and i thought, wait a minute, there is such a thing about black rhinos. i didn't know anything about -- wikipedia said it's something so obvious that's right in front of you and, of course, the premise of the black swan is you can't picture a black swan, so it doesn't exist. be and this is like, well, you can't picture the gray rhino because you're thinking with the white and the black, so it's about nuance. >> what was it that a gray swan was called? i forget. it's some bizarre -- >> i forget. there's so many titles. you know, it's funny in the talk that i did at davos that helped build on the idea, i was paired up with a fantastic japanese technology and crisis management expert, and so he had me on swans. so you can have so much fun with
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this, with all the animals. but it's actually quite serious. and i think that there's a reason that we pick animals,' sop's fables -- aesop's fables, my friends book was called why do cocks fight. [laughter] it's coincidence, but it's not. i think we can see things in animals that help us to see more clearly what we're doing. >> so maybe we should take a few questions. i would strongly urge everyone to read the book. it's very -- it's a lot of fun to read, and it's a lot more detailed. she's got one whole page of the diagnosing which kinds of rhino it is, is it a meta-rhino, and is it, you know, i forget what, a dead cat bounce rhino? >> [inaudible] [laughter] >> you really have broken it down to show, you know, the different permutations and how to diagnose. and then that leads to whether, how you try to solve it, whether
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you confront it, you run from it, you slide out of the way. but do you have anything else you want to say before we open up? >> to add on that diagnosing, i think it's some questions you ask yourself about. the most important thing is to start out picking what are my top gray rhinos. whether it's in your company or in the world, i'd often say what's your top rhino at work, what's your top personal rhino and what's your top gray rhino in the world as a citizen on the planet. you get one of each because if you have too many, then it becomes very, very complicated. you've got to prioritize. but i think in the questions you ask yourself when you're prioritizing which one to go after, you do can is this something that i know how to solve? do i need to bring in ammunition on this? is -- do i know who needs to be convinced and who has come along on the right, who's onboard with fixing it? how fast is it moving? and the big one is how
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interconnected is it to other gray rhinos. and which direction are those connections. i mean, if you have something that's going to affect several other things, then you want to prioritize that over one of the smaller ones. and, you know, it's not easy. there's no silver bullet answer. but i think just starting out asking what's your gray rhino gets you on the path towards thinking more clearly about how to solve the obvious problems that are in front of you. >> so you gave a couple examples of countries, some of this oil producers that have tried to create funds for commodity type funds to tide over the commodity cycle. and most of the time the treasury gets drained like in swrens wail la long before -- venezuela long before they actually draw on it for good purposes. i thought one of the best examples of positive gray rhino thinking long term was in last couple of weeks when saudi arabia announced they're
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creating a $2 trillion fund to bridge over the post-oil era for them both in two ways. one, the post-era of revenue from oil to but, second of all, the energy transition they will need to make in the desert. >> very much so. >> it seemed to me that was a perfect example. >> very much so. >> you've probably conducted seminars for -- [laughter] >> have not, have not been there yet. finish. >> do you want to -- i think it's probably a good idea if you just gave us your name briefly, thanks. >> [inaudible] from the foreign policy institute at sais. it's great to have you here, and congratulations on the book. it's a great way of looking at the world. and when you look at, you know, we're here in the united states in an election season. and i'd like you to, i'd like you to reflect on whether you think the rise of donald trump is a gray rhino or a black swan -- [laughter] number one. and number two, what are some of
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the biggest gray rhinos you see here in the united states? >> sure. that's a great question. and i can't -- if i had a nickel for every time i got -- [laughter] i got asked that question. it's something i've been giving a lot of thought to. for me the idea of it as reality tv star could become, you know, a leader in the primaries, that, i think, is really a black swan. but i also very much see him as a gray rhino. but it's -- i feel like trump is the embodiment of several other gray rhinos that are behind him. the inequality issue which a couple years ago was top on the world economic forum's global risk report's list of global risks, and we've heard a lot about it. thomas piketty's bestseller on inequality. it's gotten a lot of lip service, but i haven't seen
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much, if any, progress at dealing with it. and we've possibly even gone backwards on that. and you see trump's message, you see bernie sanders' message, you see the rise of populist movements in the u.s. and europe as, i think, very closely tied to our failure to address the inequality gray rhino. the other part is what i see very much as a crisis of agency. a feeling of powerlessness. it's a theme you hear often among some of the people interviewed about why they support trump, why they support sanders. and the way that they're eager to reach out and embrace someone who says, yeah, i'm going to solve it with great certainty but little detail as to how it's actually going to happen. it's, on a certain level, it comes back to, you know, magical thinking. one of the examples from the book is from the movie mars attacks, which i loved. kind of -- i try to be wacky and not totally serious all the time.
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it's not easy, but, you know, these martians come down, and they're green, and they're taking over the country and the world, and they go way out into the desert somewhere, and there's a little granny listening to the radio, and they're about to come and eat the granny, and this slim pickens song comes on the radio. and it turns out that that's the magic thing that make the little green martian heads explode inside the fish bowls. anyway, i have to go back and watch that. it's this idea of magical thinking. someone has a magical solution which, you know, one of the points of the book is it's a lot harder than that. and it's not easy. so i think the combination of the feeling of power, powerlessness to influence government, to make change happen, and that powerlessness is particularly powerful, you know? sarah palin calls it that hopey/changey stuff.
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but it's true, when obama came in, there was so much enthusiasm and raised hopes, i've seen this in latin america before. charismatic leader comes in, hopes are risen, hopes are dashed. and also i think social media's plying into that in a very interesting way which we haven't begun to see the effect of. people come out, they feel like they have a voice on social media, they can say things in certain ways. but there's a disconnect between what people are saying and what the government is doing. we're at a time when certainly in the u.s. the government is paralyzed. it's extremely polarized. the, you know, primaries are increasingly nasty. there's this just lack of civility. and those, i think, are the bigger gray rhinos. i think, you know, trump's kind of like a baby rhino or a rhino with orange hair, whatever you want to do with it. [laughter] you know, these things are to big and heavy -- so big and heavy and scary, i don't at all
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want to make light of them. but i also feel like you need to have some sort of levity in the discussion. you have to have a way to step back sometimes and say, hey, this is not impossible. without being a pollyanna, i think that you need to be able to say, yes, there are things we can do. >> right. you know, you're citing that issue of politicians sort of giving hope where there isn't a solution yet. don't forget, that's a foreign policy failure here in this country on two occasions. one, arab spring. obama went to egypt and said it, and i remember a tunisian friend of mine just last year when i was there after their revolution had been stunted and crotched really, said, you know, you told us it was okay, and you're not there with us now. and similarly, the line in the sand in syria with obama. i think people say from a foreign policy perspective, that may have done more damage to our credibility. >> absolutely.
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>> so those are both examples, i think, of letting the rhino out before you're ready to solve the problem. just letting it run around instead of dealing with it. >> yeah, absolutely. >> hi. >> hi. >> congratulations on your book. >> thank you. >> i guess i should -- [inaudible] joan michaelson, and i don't think this is working, but -- >> it is. >> it is? okay. speaking of stinky events, we are one week from the anniversary of the gulf oil spill, the sixth anniversary of the gulf oil spill. and i just did a huffington post blog on -- i'm probably going to get some rotten tomatoes thrown at me for saying this, the gift of the oil spill. because, i would like you to respond to this. because in some ways it sped up action. so i'd like you to talk about is how your principles that you wrote about in gray rhino, how we can speed this up. because what happened with the oil spill is it increased investment 32% like right out of
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the bat. now we're at $329 billion in investment in clean energy. we have the environmental movement got tailwinds. 37 states, four territories now have renewable energy standards and goals. it was like, boom, it was a hockey stick. we hate it. eleven people lost their lives, you know, 600 square miles of gooey crap on animals. there's science coming out of it, research coming out of it. so how do you use a stink key event to -- stinky event to speed up action? and, frankly, this won't prize you because you know me, but where does diversity come in? >> two issues she does deal with, by the way. [laughter] >> exactly. well, one of the points -- and i'm certainly not the first person who's ever said this, but, you know, a crisis is a terrible thing to waste. >> right. >> and there are lots of cases in which we can use a crisis to
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create positive change. and in many cases the positive change that happens is after a big mess. after the great depression, you get glass steigel. one of the chanters of the book is set in -- chapters of the book is set in calgary after the 2013 floods and some real thinking about probabilities of future floods and what to do about it. the panic stage in the book is really a double-edged sword. it's either a place where you make very bad decisions, or it's the time that pushes action. and i'm really glad to see the silver lining coming out of what happened in the gulf oil spill. you know, that said, it can be extremely dangerous to try to accelerate things. an example from pop culture that's also in the book is grey's anatomy which is one of my tv shows.
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my sister's completely addicted n. one of the early seasons, there was a whole plotline around a patient who had a heart problem. it wasn't bad enough to get on the transplant list, but everybody loved him, and one of the interns was in love with him. so she, you know, fiddled with the machines in such a way that his heart immediately became bad enough to get higher on the transplant list. and, of course, because this is a, you know, drama/soap opera, they had him all ready to do the surgery, but the surgeon who was supposed to do it got shot in an attack, and the surgery couldn't happen, and he died. that was an example of, obviously, a made-up example but of how dangerous it can be to try to push something forward. but at the same time, i think that there are some situations where there are choices to be made. i mean, sometimes people try to muddle through, they try to hide how bad a situation is. and so i think that shining some
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light on and letting people see how bad a situation is might be a more benign way of doing that. and i think that we're starting to see more and more of that with some of the ways that digital media can bring, you know, on the corporate level. the panama papers, for example, that's a way of really saying this is a problem that's happening that we need to do something about. >> diversity, because you do -- >> oh, diversity, yes. >> [inaudible] >> sorry, yes. diversity, it's sort of -- it's one of the things i call a meta-rhino. it affects other situations, and it goes right back to group think and decision making. that if you don't want to hear about a problem, if you don't want to hear that it exists, you're not going to. and you look at the very, very small numbers of women on corporate boards in, you know, as ceos in corporate leadership positions, and it's not just women. it's anyone with a different perspective.
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you know, the fact that there's not as much inclusion of people who can raise red flags. women have very, very different tolerances for risk. so i think it's a huge risk not to have diversity in the decision making process, and across companies, governments, whatever, organizations, to not make sure that there's a way for people to raise a red flag. >> no, go ahead. >> hi. my name's -- [inaudible] this is my first event at sais, and it's wonderful, thank you very much. i wanted to talk a little bit, it seems like this is a cheat sheet for problem solving really tough problems and, you know, it's fact-based, it's rational, and it really serves pragmatists. you mentioned about data, you pointed to your risk, counting steps and the aqi in china where i spent some time in beijing, it's pretty rough.
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but whether it's domestic or international, i see ideology and personal narratives really obstructing problem solving. and so, you know, specifically this today's world -- in today's world, i'm a millennial, but i feel like we're inundated with data. in beijing if i look at the embassy's aqi, that tends to be much higher than what the communist chinese party is going to tell you is the real number. everyone has data, but am i looking at parts per million in 2.5 micrometers or 10, which one's going to cause cancer and so forth. how do we start parsing the data to really achieve consensus? >> that's a fantastic question, and i totally agree with you on ideology get anything the way. and, you know, you look at data, and you go back to mark twain, and, you know, his ideas about lies, darn lies and statistics. and, you know, i think finding
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the right data, there's so much data sorting out data so that you don't just have a, you know, a haystack and a needle. there are some people doing very interesting work on that, you know, dana boyd has got a whole institute on data and society. i don't pretend to have the answers to that. but one of the things that i'm really hoping that the gray rhino can help do is bring together people with different areas of expertise and help them to identify the gray rhinos in their industry, in their field and to work together. the gray rhino on some levels is, you know, it's very simple. it's, you know, ask yourself what the gray rhino is, and everybody's going to have their own take on that. and i want that to happen. i really welcome that. i think it's a conversation x it's manager that people -- and it's something that people can interpret very, very personally. and i also actually, you know,
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think that ideology is a meta-gray rhino although i'm somewhat skeptical as to how possible it is to have absolutely no ideology. but generally, you know, isms and ists make me very uncomfortable. even though, you know, on a certain level pragmatism, you know, realizing there are limits to that. but i think that people often are not aware enough of how the ideological mask they're wearing color the way they see a problem. ..
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we could have a whole other discussion on it. >> the other point is that the business culture, for example, with the cigarettes for so many years and showing that everybody -- we just knew how harmful it was and yet we all didn't admit it. >> yes. >> thank you for -- >> you have a microphone coming. >> thank you again for coming for such a wonderful discussion. you mentioned leadership and the role of leaders in this process, including the audacity of raising hope. how did this make you reflect on leadership. >> that's a great question. i love that.
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one of the conclusions was not a very happy one, unfortunately. but it's really that leadership sometimes means being aware that you're going to take a fall for doing the right thing. joan of arc. saved france from english, burn at the stake. yeah. that you're not always going to be -- not always going to get credit for things. another part has to do with listening. goes back to the decisionmaking and diversity part of the conversation. it's been very interesting, at a couple of of talks i've given, people have sid -- i have spoken at very high level groups and also to people who are getting their job done. they said when we see a problem, what can we do to make sure that the people at the top with the power to allow change to happen -- how do we get them onboard with it?
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and that's a very different one. it speaks to leadership really being the ability to hear things you don't want to hear, to hear things from a broad set of people, from all different levels in the company, from all different perspectives, and i think of not considering yourself to be infallible. it is very much about leadership, a leader being willing to say this is in front of me and i don't have a handle on it. >> i'm still struggling to understand how to apply this thinking. if i play dis' advocate, we identify as one or many huge problems we know are coming and then we have to decide whether you're going after them or not. my question, what if we ask too soon?
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look at germany. they spent a huge amount of time trying to -- if they waited it would have been cheaper, the same with the question of carbon capture. when it becomes a crisis, it becomes cheaper to respond to the crisis in some ways, at least psychologically. so devil's advocate, how do we know we're addressing gray rhinos because we feel like we should and how do we know if we're irignoring them because there's more pertinent things right you. >> great question. how do you know if you're dealing with a threat just because it's there? how do you sort them out and prioritize. there's no easy answer and not one that fits in between the covers of the book. one of the things i was trying to do was harness the intellectual energy that the black swan did. look at so many people going,
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oh, there's a black swan. i don't know what the nexus search count would be or google search for how many mentions of black swan, and even though people were a little misguided in their interpretation of it, i just felt the focus was in the wrong place. there are not easy answers. i don't pretend to say there are. in terms of costs of responding, there's a bit of a paradox in sort of financial terms or energy, whatever measure you want to use. it often is much more expensive to respond at the last minute. your options generally narrow quite dramatically. judith and her work on resilience has showed quite extensively how much return you get if you invest in prevention and resilience. it's avoided costs costs which e
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dough don't account for properly. for example when i went to moon for the memorial for the bridge that collapsed there, i don't have the exact numbers -- how much more it costs to rebuild the bridge quickly on no notice, plus the cost in lives, plus the lost commuting times, the lost business, all of that, and it's a problem that's common to infrastructure. you -- i think there's something like 80,000 bridges that need to be fixed, and it becomes this long-term versus short-term cost calculation thing. i'm sorry, we don't have any money in the bug to deal with this. have 20 deal with this more urgent thing, and then of course when something falls apart because you health death with it early on, that only creates more of a vicious spiral. and so i think we need to think someone differently how we account for things in policymaking to look harder at
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avoided costs. and the other question when there's a cries there are magical pool's 0 of money from federal disaster funds and blah blah blah. what if we were to instead shrink the federal disaster fund pool and re-allocate some of that turnses -- towards prevention, with aid in other countries as well. stephen covey has a great tool another of the seven habits of finally effective leaders. he has a grid. is it urgent and important? he points out how much time we spend in the urgent category whether or not it's important, and so there's some things you do need to just let go. this is it. and in business sometimes that's called creative destruction and it can be a very good thing. you want to cushion the people who are affected by it as much as you can. but find ways to all allocate
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more time, more budget, more energy, more priority, whatever, to things that are important but not necessarily immediate, and i think we could do a lot better at every level, from policymaking at the global to the national to the regional and local levels, so businesses, to personal life. one of the great lines that comes up is retirement planning or saving for college. there are all sorts of things that are very relevant on a personal level, and obviously those the big giant things that affect everyone, but for an individual who is affected it's pretty darn important. so i think you can be flex nibble your definition there. >> -- flexible in your definition there. >> someone who invest inside these areas, i have had to argue that you don't go off and just try to invent all new technologies immediately. that leads to solyndra problems and crazy things, especially when politicians do it.
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you do the thing that are cost effective. energy efficiency, pricing, you buy time. you don't often the income clear power plants today because they have 20 more years to run, and that's 20% of the electricity in the country, even if you don't like nuclear power. al negotiation i'm sorry, you can't do that but if you buy 20 or 40 more years, what matters where we are technologically in 2050. and our renewable energy program. i had the transition guys from germany come in ten years ago now, saying, we've put 25,000 mega watts or wind in place. we spent more money than you can knowledge and we can't say it's greenhouse gas positive because we have so mach standby generation diesel power we have
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to make to meet peak load when the wind isn't blowing. so policymakers aren't great rhino solvers. parse it, look at the long term you have 20, 30 more years for your technology side. and put in a program like saudi arabia's program. [inaudible question] -- take care of their own neighborhoods so you have that pressure come doing. >> called pork barrel. >> exactly. [inaudible question] >> you were talking about the same kind of gray rhino. [inaudible question] >> very much so. i think there are situations where you have to say, this is just not worth fighting. an example from the corporate
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world, kodak invented the digital camera, and they decided not to run with it because they were afraid they were going to cannibalize their existing technology, and didn't work out real well for them. but the other thing, when i was in minnesota, i was amazed, the bridge memorial was right near the mill museum, and all these old mills in the area, and they were just all there. of course, when the mills switched from water power to this other source of energy, they could be anywhere. i think there are lot of industries that become obsolete, that fall aside because there's something better, and it's important to realize when that is. when is something fighting a losing battle? when does something fall aside and let something better come by?
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it goes back to a big point in the book, which is how you turn a threat into an opportunity. very common one for many companies is the question of succession, and control. you have people saying, hey, this is -- the older management doesn't want to recognize that it's time for newer energies to come in. so there's definitely times when the right thing to do is say, all right, trample me. >> put me on an iceberg. i want to thank everybody. i think michelle is willing to stick around and answer a few questions, but this is great. want to thank michelle for writing the book to give me an opportunity to spend this time with you. >> thank you. i love talking to you. [applause]
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[inaudible conversations] >> here's a look at authors recently featured on "after words." our weekly author interview program. sue klebold, mother of dylan klebold, talks about mental health and then. and former congressman watts talked about the todaying principles he has followed in his professional and personal life. in the combing weeks, peter marx
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returns the man who turned the company around during the height of the financial crisis. don watkins will argue that measures to alleviate income inequality actually end up hurting low-income americans. also coming up, shaka will discuss criminal justice reform and recall his 19 years in prison. and this weekend, aol cofounder will tell us how emerging technologies are reshaping the internet. >> some ways eave -- every company is a tech company. even the internet is shifting from being an interesting phenomena, to but the enabled disruption, and in the future it will be taken for granted. electricity enabled. >> take it for grantedded. the internet is on a similar path. we'll know when we get there and don't have a hiven hoosh hyphen.
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we call it e-mail, and some day it bust just we email. i took we're on that hath and the third wave is just the next iteration, the next step, the nextwave of taking the idea of the internet ask shifting it from being a quirky technology thing to being a fundamental part of everyday life. >> "after words" airs on booktv every saturday ands. you can watch all previous proms on our web site. booktv.org. >> in your book you write that america is the world's largest jail. >> yes, we are, and it's the title we should wear shamefully. we have five percent of the world's population but 25% of the world's prison population, 2.3 million people incarcerated
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we're seeming over $50 billion a year on corrections, and when it comes to the racial disparities of our system there are more african-americans under correctional supervision today than there were slaves at thing high of slavery in 1850. >> host: how did we get there? >> guest: it's all really going back to the war on drugs in many respects, which began in the late '70s and created a whole series of disparities in sentencing sentencing and also goes back to sentencing tough on crime, sentencing laws that made it easier for people to good to jail, easier for them stay there, and easier for them to stay there for very extended periods of time. >> host: you're a native new yorker, and there was a period in the '70s where new york was rife with crime. people were scared. was there a different solution? >> guest: well, for one, fear is a terrible -- fear is not the thing to be ruled by when we make decisions as far as government and as far as these

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